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Apple v. Amazon v. Hulu v. Google v. Netflix

0907 steve jobs

Last month, the masters of the television distribution business—the cable, satellite, and fiber-optic distributors—were told that in the second quarter of 2010, they had experienced their first-ever decline in total subscribers. We now request a moment of silence for our nation’s cable companies. Hey, no snickering.

With the old gods dying, a new set of deities is emerging to demand tribute for the privilege of watching old episodes of “Doctor Who” and “Rhoda”: Apple, Amazon, Google, Hulu, and Netflix, each of which announced at least one new initiative this summer. Web (and cell phone) distribution is now more than ever looking like the not-so-distant-future model. To help us understand the impact for actors, we turned—as we often do when legal questions that have nothing to do with unpaid child support arise—to attorney Jonathan Handel, author of the forthcoming book “Hollywood on Strike!” He walked us through how actors’ residuals from the online services are calculated.

> Apple. Steve Jobs and company announced Sept. 1 that they had reached a deal to sell 30-day rental downloads of shows from ABC, Fox, the Disney Channel, and BBC America. According to Handel, SAG and AFTRA contracts are clear on what actors should receive from the new initiative: 3.6 percent of the distributor’s gross divided up among all actors on an episode. “That basically means what the studio takes in from Apple,” Handel said. “It’s based on the license fee that’s paid by Apple to Fox or Disney or whomever.”

> Amazon. Just hours after Apple’s big announcement, Amazon announced that it had lowered the price of its television show downloads to 99 cents—the same fee that Apple charges. The difference is that while Apple offers rentals that expire after 30 days, Amazon’s downloads are permanent. “That is what is known as electronic sell-through,” Handel said, adding that the residual formula applied is similar to that used for DVDs, where a small percentage of the gross is distributed among the actors. He noted that while the percentage for electronic sell-through is higher than it is for DVDs, the purchase price for an electronic copy is significantly lower. But “on the other hand,” he said, “because the purchase price is lower, the volume may be significantly greater. That’s what the industry is hoping, that if you sell something for 99 cents rather than $20, more people will buy it.”

> Hulu Plus. Hulu’s premium pay service, which allows access by subscription to older episodes of television shows, “is not clearly dealt with in the residuals language,” Handel said. “I’ve had questions from the company side saying, ‘I have to give advice to my boss. What should I be saying?’ The answer was, ‘You should be saying that it’s unclear.’ It wouldn’t surprise me if Hulu Plus leads either to an arbitration or, in this round of negotiations, to a clarification of language.”

> Google. The Financial Times reported Aug. 29 that Google is exploring a pay-per-view rental model of delivering films through YouTube. According to Handel, even though Google would offer a webstream and Apple a digital download, the residuals would be calculated the same way: 3.6 percent of distributor’s gross in aggregate.

> Netflix. Like Hulu Plus, Netflix—which offers online streaming of films and television shows to all subscribers to its DVD-by-mail service—is a difficult case. “Netflix may be paying a separate licensing fee to the studios for the streaming rights,” Handel said. “They’re obviously paying something.” Whatever that something is, actors are entitled to a piece of it—but how big a piece? “It’s not electronic sell-through because you’re not owning a copy, but it’s not exactly e-rental either.”

Pictured: Steve Jobs (Photo: Getty Images)

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